A big shareholder at HomeStreet is pushing the Seattle company to sell its Fannie Mae delegated underwriting and servicing (DUS) license and restructure its balance sheet.
Blue Lion Capital, which has sparred with the $9.5 billion-asset company in the past, wrote in a letter to shareholders board that it believes the DUS license could be sold for $100 million.
The investor noted that only 25 licenses exist. License holders can underwrite, originate and sell multifamily loans under a loss-share arrangement with Fannie Mae.
At the same time, HomeStreet originated and sold $5 million Fannie Mae DUS loans in the first half of 2023, a significant decline from roughly $90 million a year earlier.
“As you might imagine, the profits in 2023 year-to-date are de-minimis best case, given the fixed costs,” Chuck Griege, a Blue Lion managing partner, said in the letter.
“The trajectory of this business has been in a meaningful decline since 2020,” he alleged. “Despite this history, HomeStreet’s management claims that this business is a core part of the bank and the license is not for sale.”
Separately, Blue Lion suggested that the board consider restructuring HomeStreet’s balance sheet by selling roughly $1.3 billion of assets. The investor said that proceeds from the asset sales could be used to pay off about $1.3 billion of high-cost deposits and borrowings.